A: As is usual for post-Labor day action, both the data and my own business is seeing a nice tick up in activity over the past 3-4 weeks. The pending sales trends do not yet show it, but the real time Broker Status Updates are showing the recent action. In the past week, which by the way is not enough time to call a new trend, I see 182 contracts signed. If this pace continues, we should see around 728 contracts signed in last 30 days, up from around 600 the past 30 days; a nice tick up. In my business, I recently lost a bidding war for a well priced $2m+ condo downtown and found out an apartment of great interest uptown for another client just had a deal accepted. Anectdotal, of course, but a change nonetheless from the very quiet past 2-3 months.
When released, the real time Broker Status Updates data table (pictured below) will show you the market as it changes in real time. It captures the day's total listing status changes from all REBNY member firms (that TODAY column will refresh up to 6x a day as status changes are processed) and tallies up trends for the last week and month. It is basically a 30-day moving window of our market as property moves from one listing state to another. Because it covers the whole market, checking this tool once a day will eventually give you a natural pulse on market trends as they unfold - you'll just get used to it and see the market heat up and slow down:
This just means we need to keep our eyes open to see if the pickup in the pace of demand sustains itself. Now it may take a few weeks for weekly and monthly changes to really show itself in a metric like pending sales. The reason lies in the methodology of how we calculate pending sales. The way it usually works is first we see a tick up in inventory trends, followed by a tick up in signed deals. Over the past 4 weeks I see a clear uptick in inventory (look at below chart), but only see a recent tick up in contracts signed over the past week or so (look at above real time data table). The pending sales trend is still hovering at its lows seen in August and will only react to sustained changes in our marketplace. If the Broker Status Update table continues the pace of recent signed deals, I would expect pending sales to tick up nicely from depressed levels over the next few weeks.
Here is a chart showing Manhattan ACTIVE vs PENDING SALES trends for the past 1 Year:
NOTE: By the way, it is very interesting to look at the YEST column in the above Broker Status Update table. On our soon to be released analytics, the YEST column will show you the total change recorded the day before and is in essence the same as the 1-DAY column in the Streeteasy powered widget we have had since 2008. Notice how both systems caught 33 signed deals yesterday and 108 newly activated listings hitting the market! Great to see separate systems capturing very similar data.
A: Many experts prefer to look at year-over-year sales reports to account for seasonality. Therefore, please recall that it was the Q3-2009 market reports that basically defined the most difficult period Manhattan real estate went through following the failure of Lehman. Due to the lagging nature of quarterly reports, the Q3-2009 report captured the distressed deals signed when fear was highest in early 2009; think of those that signed deals in March-May which closed in the period July-September for inclusion in that Q3-2009 report. Since then, the progressive improvement ultimately topped itself off with a very active 2010 bonus season; so expect this year's Q3 report to show nice YoY average and median sales price gains. I would also expect to see continued Qtr-Qtr improvements as the higher end price points saw great sales volume earlier this year that have since closed. Discussing where the market is now and where we just came from, paints a different story.
Flashback to May, "Showing You Why The Q3 Report Will Reveal Improvement":
The two main reasons why the Q3-2010 report will be one to look forward to is:The chart referenced in that post is below and shows you the Quarterly Average Sales Price Trends from 3 top Manhattan brokerages:
1) Year-over-Year Comparison to Q3-2009 - It was the 3rd quarter report of 2009 that defined the downturn, a few months after the real trough in our market, as public record finally caught the sales that were signed into contract earlier last year. We are now heading into these defining reports, making y-o-y trends easier to beat.
2) Public Record Yet To Catch The Full Improvement - Due to the lagging nature of these reports, as time passes we will see how this market behaved for months that already passed. I can tell you that JAN-MARCH 2010 were very strong as tight inventory and strong demand caused some competition amongst buyers. The result was a sharp decline in days on market trends and listing discount measurements; as seen in the chart in my post, "Misinterpreting 'Bidding War' Statements From Brokers". With time, quarterly reports will gradual catch up with the progressive improvement right as we head into the two y-o-y reports that defined the downturn this market experienced.
*Note: This chart has not been updated to include possible backward revisions done by these firms' reports.
You can see that its the Q3-2009 reports that for the most part, defined the downturn we saw in our markets. So, beating those levels should be easy given the reflation from very distressed levels that was experienced across all price points.
For those that want to know whats going on right now, its best to measure the pace of sales for the past 3-4 months to get a sense of current market conditions. When we look at pending sales trends, we see a steady decline starting around mid-May and seemingly bottoming around end of August. The decline fully retraces the surge we saw earlier this year. So for many brokers out there, it was a very active bonus season followed by a very slow summer in terms of new deals signed! Here is a chart showing the past 9 months of Pending Sales:
PENDING METHODOLOGY --> Includes all listings that go from an ACTIVE state to a CSGN state; excludes all listings that have been in contract for longer than 6 months (avg time to close is about 3-4 months), and excludes all listings that are set to CSGN but have not been updated in the past 90 days by the listing broker.
The reason we designed our methodology the way we did is so that delayed closings, stale and obsolete data do not dilute the sensitivity of the pending sales measurement to capturing any real time market shifts. Don't expect the upcoming reports to show you the most recent few months. Rather, the slowdown in pending sales and closings will probably come out in the Q4-2010 or Q1-2011 reports.
Christine Toes posting here... My summer was slow, as is traditional for sales. When I first started in real estate, I did mostly rentals, so even though I do mostly sales now, I can go where the business is and survive any market. The best rental deals were in new buildings where the owners wanted to lease up quickly and were offering free rent and paying all or most of the broker's fees. Past customers called me and asked me if I could show them what I had for "no fee," so I took one couple to 200 E 67th Street (AIRE) and the other couple to 350 W 37th Street (Townsend), and they couldn't have been happier to get a month (or two) free rent and not have to pay a broker's fee (the building is paying a one month fee to brokers). What they did get was a brand new apartment with a stainless/granite kitchen, hardwood floors, floor to ceiling windows, and a washer-dryer in the apartment. And they're in a brand new building with lots of amenities. I love making people happy!
Toes says: It's so nice to finally start seeing new rental buildings with washer dryers in the units and finishes and amenities somewhat similar to new condo buildings.
After a slow summer (for sales), I was ready for Labor Day when new inventory comes onto the market and buyers are back from the Hamptons/Jersey Shore/vacation. In the week before and after Labor Day, I was involved in three bidding wars.
Deal #1. Resale in loft condo conversion on Park Ave in 20s. Ask $1.075M, on market since June at that price. My customer offered just below $1M (pesky mansion tax) to beat out two other interested and all-cash buyers who all appeared the 3rd/4th week of August. Even though my customer was not all cash (50% financing), we thought we had the apartment until over Labor Day weekend a 4th buyer offered something in the area of $1.04M all cash. Two days later my buyer decided he didn't want to let the apartment go. We asked what he would have to pay for the seller to kill the other deal, my customer came up to the number the seller wanted, and we received an executed contract yesterday. He had to waive the financing contingency to get the apartment - it is difficult to compete against all-cash buyers. He really loved the apartment, so after consulting his attorney and his mortgage broker, he decided to do it. The building is solid and so are his financials.
Toes says: Around Labor Day weekend, other buyers materialize and suddenly you are competing for properties that have been sitting all summer. Mid/Late August is a great time for deals! Same for late November through December - great time to buy. Sellers want to get out by the end of the year & tons of buyers are on vacation & not actively in the market. Don't wait until the New Year or you'll end up paying more than you could have had the property for in December.
Deal #2 - one of my listings. On market for 5.5 months (the longest I have ever had a listing!). The light, views and private 700 sq ft terrace were stunning. The sellers and I mis-judged how much of a discount buyers would want for the gut renovation the apartment needed. (For the $250K-$300K of renos needed, buyers wanted about a $500K-$600K discount on what the apartment would sell for if it were renovated). The sellers had also been offered $2M for the apartment in 2007 so when I suggested $1.6M, they asked to start at $1.75M. It took 3 price reductions to get to the right range. Once we dropped to $1.45M, buyers started circling, we ended up with a "highest and best" offer situation the week after Labor Day, with three all-cash buyers. The contract was just signed not-too-far from the asking price.
Toes says: I am constantly astounded by how much money New Yorkers have and how many buyers pay cash, especially in a market where interest rates are so low.
Toes says: Buy something that needs a major renovation (but has all of the other ingredients: light, views, maybe outdoor space or something unique about it, location, etc.) and you can often get a huge discount to the market. Once someone spends $250K-$300K renovating this apartment they will automatically add an additional $250K+ to the resale price, as long as the renovation is comparable to new condo construction and not too "taste-specific." And they will have an apartment that they love.
Deal #3 - condo loft comes onto the market on W 13th street/8th Ave. 830 sq ft for $1.1M (and it needs a new kitchen - at a minimum). Elevator building... Sunny... Beamed ceilings... Fireplace... WASHER DRYER in the apartment! Something like this comes on to the market maybe once or twice a year. It is exactly what my buyer has been looking for for 6 months. It is also exactly what a lot of people have been looking for. It comes onto the market on a Thursday, by Sunday they already have an all cash offer at the asking price. The price is already at $1.15M before they even go to the best and final and my buyer decides not to even compete.
Toes says: You can't win them all. If there is something very specific that you want, ie, a condo LOFT in the prime W Village (which is right up there with finding a unicorn), other people will want it also. You have to decide how much it is worth to you. Offer enough so that if you find out that if you lost it for $5K, you aren't crying yourself to sleep at night. If you can say "I'm ok if I lose it at anything over such and such a price" you made the right choice to let it go.
Toes says: If you have a one bedroom loft in an elevator building in the West Village that you want to sell for $995K - $1.15M and it isn't on the market yet, please CALL ME! My buyer is crushed that the apartment went so quickly at over the asking price. He just couldn't wrap his head around it, even after 6 months of looking, and can you blame him? We're in a recession and most media outlets are talking about a double dip. There hasn't even been a single dip in the West Village - at least not in this price range and for this product.
Toes says: anything priced well goes fast. If 30 days go by or 30 buyers have seen the apartment and you have no good offers, as long as the apartment is being marketed properly (internet, email and paper), you are not priced for the current market conditions. Revisit the comps and price your property at the low end of those comps so that your apartment is one of the next to sell. If approximately 5 Upper East Side studios east of 3rd Ave in the 80s sell per month, you need to be one of the top 5 best apartments on the market in order to sell that month. Buyers are savvy. If an apartment looks over priced, they wont even look at it.
A: First off, I apologize for the delay with the site launch as a few data integrity issues popped up in the last minute that required immediate attention. All have been resolved since, and now we have to finish the final launch list that was put on hold in the meantime. I especially want to apologize to Jhoanna Robledo and the NY Mag editorial team for this delay - since I did confirm for the article last week that I would be up and running by now. For that, I apologize. All we can do right now is focus on finishing these last items. In meantime, I want to show you an interesting chart comparing ACTIVE vs OFF-MARKET trends.
Looking at the data and how it all fits together, its clear that when the Manhattan markets are strong sellers choose to leave their listings on the market. On the flip side, when markets deteriorate sellers tend to take their listings off the market. No rocket science here. The reasoning is that its the sellers and the seller's broker that gets the most information on how their unique product is being received by the changing open marketplace: they see the interest, they see the bids, and they see the traffic levels.
With this information over time, better decisions about the listing can be made. That is of course assuming there is no desperation to liquidate and raise cash; which will always be a part of this market.
Take a look at a 1YR chart of ACTIVE vs OFF-MARKET Manhattan Trends first; and remember, the innovation in the upcoming system lies in the flow algorithms that govern our entire platform and the methodology that ensures a highly sensitive tracking mechanism. In the new analytics system, there will be only 4 listing states (active, off market, in contract, and sold/closed) as we track the movement of Manhattan inventory from one listing state to another. At no time can any one listing occupy more than one state. No more double counting, no more integrity issues.
Notice the inverse relationship between Active vs Off-Market trends; as it should be during normal times with a marketplace affected by seasonality. As noted in the charts:
1) Late 2009 - Off-Market (green line) trends rise as we head into December holidays/new year, and Active inventory (orange line) trends fall
2) Jan 2010 - Our bonus season begins, as listings come back on market causing off-market trends to fall, and increasing our inventory. After the very active months, seasonality kicks in again around mid-May as this market saw more listings taken off market resulting once again in a gradual decline of our inventory.
3) End of Aug - As we get past Labor Day, we see a sharp bump for both as listings come back on market from off-market inventory - the negative correlation at the very end of the chart.
The reason these are so interesting is how it all fits together. Now that we solved the biggest data integrity issues for the main flaws in the listings data, the movement of this inventory from one state to another paints a clear picture of what this market is doing from a supply vs demand standpoint. It's when the market gets hairy that these trends start to stray from normal patterns, telling us in real time what may be going on - imagine having these tools in late 2008 and early 2009 as the price adjustment ran its course?
Now, look at the same chart starting AUG 1st, 2008 - present. Back then, as Lehman Brothers failed and shook the financial system and the Manhattan marketplace, we saw a 3-4 month positive correlation between off-market trends and active inventory.
Active Inventory AUG 1st, 2008 to Late DEC, 2008 ---> went from around 7,100 to about 8,200; up about 15%
Off Market Inventory AUG 1st, 2008 to Late DEC, 2008 --> went from around 2,800 to about 4,050; up about 45%
Think about it. Many sellers took their listings off the market because of the severe uncertainty and poor market conditions - yet, inventory still rose 15%? It becomes clear that the seller pool, or the size of potential inventory here in our market, grew rapidly. Homeowners that may not have considered selling, all of a sudden had their places on the market. It was a combination of fear + need to liquidate. The market was in the midst of adjusting to a dislocation between macro forces and prior trades. The adjustment period lasted about 6-7 months, when the deterioration of demand bottomed out and started to progressively improve.
This is what leads me to believe that in the worst market conditions, we will see all of the following occur at the same time:
a) Off-Market trends surge
b) Inventory rise
c) Pending Sales collapse
And that is exactly what we saw from Aug 2008 until March/April 2009.
A: I encourage all brokers and followers of this market to try to read this post in its entirety; as it touches a very important structural issue in this market. It is somewhat Inside Baseball, so consider yourself warned. At this point in development, I know the broker sharing system inside and out. I know all the flaws, all the tricks, and all the strange things that occur in the listing system. It all has to do with the system structure and the brokers/developers that maintain their listings. In the end, the data is only as good as the broker/developer that maintains it - my only wish is that BROKERS PLEASE UPDATE THE TRUE STATUS YOUR LISTINGS REGULARLY!!!! If old listings were never updated, then guess what, UPDATE THEM NOW top the proper status! This makes measuring market activity accurately quite a cumbersome task. Trust me. The only other people I know that understand how hard this task is are the folks at Realplus, OLR, BrokersNYC, Streeteasy and Propertyshark.com. The last final hurdle I see is to somehow standardize the listing system in order to solve what I will call, The New Dev Problem.
Have you ever wondered what the real Active Inventory is in the Manhattan marketplace? You can't just count every listing preset to Active; why, because think about how many of those have not been recently updated by the listing broker. There needs to be quality control to filter out the stale listings and other poisons that otherwise would affect a good measurement. When you think back to the development boom, a whole new problem arises: LACK OF INVENTORY RECORDS. If you are at all a follower of this market, I am sure this popped into your head at one point or another. How do we accurately measure something if there is no data for it?
Imagine its 2006, right at the start of the euphoric phase of the most recent boom and a new 254-unit development finally got the approval to begin marketing. Naturally, the developer will release a batch of units first, try to sell those out, file a new amendment with the attorney general's office if prices are to be changed on unreleased units, and then release a new batch of inventory at a different price point then the first batch. This 'developer model' for lack of a better phrase, created a sense of urgency in the mindset of consumers as buyers rushed to buy in before the next phase of higher priced units were released. This model also has consequences from a listing system point of view which ripples to a consequence for any system trying to measure the market.
Taking our example, we have a hypothetical 254-unit development all ready to go. So, the developers sales team goes ahead and creates a listing record for 30 or so units representing their first batch; their first offering to the public. The developer decides not to release all units to the public likely because:
a) they dont want to 'flood' the market with new inventory and the consequences of having 254 units competing with each other at the same time...
b) simple confusion..it requires their sales team to be more knowledgeable of all the different floorplans and little things associated with each and every unit right off the bat
c) they want to secure the 'developer model' of creating a sense of urgency for consumers by raising prices on later phases of unit release...
d) the sponsor may decide not to sell all units, and perhaps hold some units or rent out some units depending on product demand, the developer's financial situation/loan terms, or general market conditions...the sponsor has every right to make these kinds of decisions
The important thing is that no one can deny the developer of a large new development the right to keep some units OFF MARKET or withhold some units from ever being for sale in the first place. In reality, I believe the main reason developers withhold units is "explanation C" above as its my opinion the sponsor of the project would prefer to sell all units, make their money and move on. It is when the market does not co-operate that alternative decisions must be made.
Back to the problem. How is anybody supposed to accurately measure the Inventory Side of the Manhattan marketplace when units that in reality are available for sale, have no history records and are being held back for various reasons? The public calls this Shadow Inventory:
Shadow Inventory = New Dev Unreleased UnitsBut there is a solution to this problem and its very simple. All that is required is a listing system that makes it mandatory for a New Project (any kind of new development) to create an initial history record for ALL UNITS included in the first approved offering plan once the first phase of marketing begins. That is, the Schedule A of the offering plan that lists all units in the offering should have a unique record created right off the bat. The sales team for the developer has every right to place how ever many units they want to FUTURE, a status update that is in our listing system, and only release the pre-determined set units to ACTIVE to maintain the exact model they used in prior years. But every unit in the new building now has an initial record, with an initial history that can be measured. The public will see no change at all and will continue to only find released units chosen by the developer and their sales team.
WHY ITS A PROBLEM: In reality, unreleased units were for sale; they just were not released to the public and had no record created that the unit ever even existed. Therefore, what we have is a situation where the sales teams uploaded a batch of signed contracts in one swoop (for ease) well AFTER the actual contract signed date and leaving us with a new unit whose first history record is set to CONTRACT SIGNED. Ask yourself, how can a unit go to contract if it was never a part of ACTIVE inventory? It can't? In reality, this unit was on the market and available for sale. It had to be if a buyer signed a contract for it and ultimately closed on it? The result is that anyone trying to measure both active inventory and pending sales will have a problem as a result of how these new developments handled the maintenance of their inventory:
Problem w/ Active Inventory: It fails to capture the New Dev's shadow inventory that was never released but in reality was there; Active Inventory for 2005-2007 was greatly under-inflated
Problem w/ Pending Sales: Timeliness is sacrificed as sales teams for developers fail to update systems as contracts are signed PLUS you can have a surge in pending sales and see no relationship in Active inventory trends; because there was no active inventory in the first place. This causes a flaw between pending sales and ACRIS public record sales, where pending sales SHOULD lead actual closed sales caught by ACRIS.
This is the reason why you see plenty of new development sales on Streeteasy but see no associated listing for the unit. Clearly there should be one.
The Solution: Design the broker sharing system to make it mandatory for new developments to create a record for ALL units at the time of first marketing based on the Schedule A of listed units in the first offering plan filed with the attorney general's office.
I don't care if a 254-unit takes 220 units and places them in the FUTURE or OFF MKT category right off the bat; listings they can activate at a later time. That is the developer's decision and right. But if they did it this way at least we can measure it as a surge in off market inventory, knowing that when the unreleased units become active, off market trends will reflect the shift. Furthermore, for new devs only, a safety mechanism should be put in place that makes it necessary for sales teams to ACTIVATE an off market listing prior to updating the status to CONTRACT SIGNED. It should be impossible for a unit to go directly from off market to contract signed. Rather, the listing should be updated to ACTIVE and then allowed to be changed to contract signed. This is an easy structural safety mechanism that would reflect reality and solve a very big problem when measuring this markets changing trends without changing a thing for the developers wishing to control unreleased units.
As it is now, we have to pull out all new devs with no prior ACTIVE state from our data so as to not poison all the efforts we made to enhance accuracy for measuring the existing resale marketplace in Manhattan. It won't affect active inventory because units were not released in the first place. For pending sales, it will only affect new dev listings whose status was first set to contract signed, with no prior ACTIVE state declared - data we deem as inaccurate and big time lagging. I checked thousands of these listing records with the 'image' documents recorded in ACRIS to find out that in reality these contracts were signed some 12-24 months earlier; the poison that screwed up the charts. So, we willfully but reluctantly removed the poison.
In the end, pulling these flawed listings out will make the data significantly more accurate. Not perfect, but a more accurate measurement of the markets. That's what its all about, measuring this fast moving markets inventory as listings go from one state to another. The good news is that for the most part these listings have closed and if re-marketed, will be a part of existing resale inventory which our platform measures quite well. Its a future new dev boom that will not be captured if nothing is done ahead of time; although the likelihood of new boom in the coming years are low.
If you read this far, props to you and hopefully you understand a bit more about how difficult this Manhattan market is to accurately measure - this is just one issue. I truly believe change will prove helpful for everyone that follows this marketplace; brokers, firm execs, and the consumers they service! Even the developers will benefit. Transparency is GOOD!
A: Wanted to give props to Jhoanna Robledo for writing a very nice piece about a our new tracking platform as the new UrbanDigs approaches launch. Very exciting times indeed so please check back soon for what we believe will be an entirely new way to measure the Manhattan real estate marketplace!
NY Mag discusses how you can soon, "Be A Quant; A new website lets you mine real-estate data in real time. We ran its first test drive":
How’s the market doing?” is a question that is harder to answer than it seems. A broker with unattended open houses may be bearish; a seller fielding offers the same day is brimming with optimism. Limited viewpoints, small sample sizes, old saws, and dated information often lead to misconceptions.Stay tuned...!!
Noah Rosenblatt—the broker behind the popular UrbanDigs blog—is looking to change that. At its relaunch, scheduled for this week, UrbanDigs.com will be devoted to data analysis, allowing users, for $20 per month, to track market shifts by neighborhood and price in real time, create trend charts, and chat about what they’re seeing. You can (to give a simple example) keep a daily watch on the inventory of listings in your area, and compare the trend with previous years or other parts of the city. If you spot a sharp change, you can adjust your price or schedule an open house immediately. You can break down data in dozens of other ways, too. Instead of waiting for quarterly reports from the brokerages, you can generate up-to-the-minute ones.
It’s definitely for the hard-core numbers geek, and its data-heavy approach may intimidate the casual shopper. If, however, you are the sort of person who builds spreadsheets to track your retirement portfolio, you are likely to fall for this site, especially if you use it along with a more listings-driven service like StreetEasy.com. It gives any buyer the tools to become a real-estate quant.
A: If anything, I am expecting a nice tick-UP in activity from last month's lull. Specifically, I would expect to see activity in inventory trends first followed by a tick-up in the pace of signed contracts. Ok, no rocket science here and sounds fairly logical to think this way. The most recent broker activity suggests this is beginning with over 240 new listings hitting the market in the last 2 days alone. These are all typical shifts in activity for this time of year, but still, something about this summer made it feel especially slow. So how should we look at this market now?
Was it the record heat? Was it the sharpness of the slowdown considering how crazy it was in March and April? Or maybe it was the 10% correction in equity markets (the Euro sovereign debt concerns) that happen to come right as our mini-frenzy was peaking? You see, when the market gets into a mini-euphoria like it did earlier this year, it doesn't take much to change buyer sentiment completely.
Since we saw a steep tick down in activity across all metrics (inventory trends down, off market trends down, and pending sales trends down), it's difficult to say that the disappearance of buyers = a new price adjustment occurring. Rather, to me, its seasonality taken to the extreme and I'll explain why in a moment. However, should this pace of activity last for 2-3 more months, then we got something to talk about.
Those who really want to gain a grasp on the pulse of this fast changing seasonal market, should use caution in how you interpret one single metric on its own. Sure its informative and empowering to analyze one thing like inventory or pending sales trends, but to get a better grasp of the market you should take into account these three elements: inventory trends, pending sales trends, and off market trends.
WEAKEST MARKET --> will see inventory trends surge, off market trends surge, and pending sales tank
WEAKENING MARKET --> will see inventory trends flat or rising, off market trends flat or rising, and pending sales falling
STRENGTHENING MARKET --> will see inventory trends flat or falling, off market trends falling, and pending sales rising
STRONGEST MARKET --> will see inventory trends falling, off market trends falling, and pending sales surging
Read those over a bit and think about it for a while and it starts to make sense. Sellers take their listing off the market when markets are weak and they don't think they can get their price (leaving those that MUST sell to list property). As this occurs, inventory trends are pressured to the downside or muted on the upside due to the rising trend of removing listings from the active marketplace. When markets really shit the bed (think Lehman), sellers will flock to take their property off the market. So, if inventory trends rise during this period of time it is telling us that the entire seller pool (or those in Manhattan that are choosing now to sell their home), is expanding big time! People want OUT! Think about that.
Putting ourselves back in time & place to when Lehman brothers failed in late 2008, we saw three things occur all at the same time:
1) Surging Active Inventory Trends
2) Surging Off-Market Trends, and
3) Pending Sales Tanking
...which when combined together resulted in a adjustment in price action until early 2009, when prices fell low enough and buyer confidence returned where they were willing to take on the risk of doing deals at those levels. In short, property prices started to properly reflect the risks at that time. In hindsight, those that signed deals in early 2009 made out quite well!
This is what is going to make the interpretation of our new analytics platform so exciting. People may look at the same charts, yet come to entirely different opinions. Looking at recent trends, everything saw a slowdown. This is why I want to wait a month or two more to see confirmation that this summer was in fact, overly seasonal, before making any statements on price action.
A: Sometimes I just have to read Zero Hedge, if for nothing more than the depths they dig to write interesting stories. Here is a great one. Flashback 8 years and what you get is Paul Krugman's Keynesian opinions on how Greenspan and the fed needed to create a 'housing bubble' in order to save the economy from a double dip recession following the stock market crash. When listening to Krugman's advice to stimulate more today, maybe we should think about how the 'create a housing bubble' advice turned out for our economy first!
Via NY Times from Aug 2nd, 2002 (hat tip Zero hedge): "Dubya's Double Dip":
Consumers kept spending as the Internet bubble collapsed; they kept spending despite terrorist attacks. Taking advantage of low interest rates, they refinanced their houses and took the proceeds to the shopping malls. But predictions of an imminent recovery in business investment keep turning out to be premature.It seems Krugman was questioning if the fed could even pull off the creation of a housing bubble, but at the same time calling that circumstance optimal. No where is there discussion of the negative side effects of a housing or credit bubble, or what a bust might look like. Keynesian thinking at its greatest. Take a look around, and ask yourself how the housing bubble benefited Americans. How did it benefit our deficits as they stand today, compared to how they were in 2002? Absolute insanity. When will people learn that free-lunch Keynesian theories act mostly to create the illusions of recovery, and the party always ends with consequences that were unintended. A housing bubble sounds nice and all until you think about the ultimate bust, the taxpayer bailouts, the soaring deficits, the hit to employment, the forces of credit contraction, moral hazard of bailouts, tough regulation to prevent the episode from happening again, and the pain that existing leveraged bets takes on consumer and corporate balance sheets. And we saw all those consequences and more.
The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
The administration needs a recovery because, with deficits exploding, the only way it can justify that tax cut is by pretending that it was just what the economy needed.
So what now? Why, they want more stimulus! To these guys, it will never be enough and it will never be time to get on the road to fiscal sanity. I think its time we all grow up and learn to live with the mistakes that were already proven. If you cant learn from your proven mistakes, you are doomed for more future failures. We cant fix a debt problem by taking on more debt. Even a 5th grader can figure that one out! How oh how did we get to this point!!
A: The month of August seemed to top off the record hot NYC summer in dullness; yep, it was that hot this summer. Combine a hotter than normal Feb-April with a slower than normal record hot summer in Manhattan and you get a real crazy market seeing heightened seasonality. Reports of a 'summer uptick' are simply anecdotal reports of pockets of action. Lets look at the full market and see for ourselves.
What people need to understand is that deals are being signed at all times, by all sorts of brokers out there. You have a new broker get a few deals, and to him/her, the market is active. You get a top producing team experiencing a slow summer, and to them you see a slow market. Its all very personal and related to any one agent's lead pool - sometimes I work months to build up enough leads to pull of 3-4 deals in one month. The market is bigger than all of us and should be measured as a whole, not individually, taking into account ALL broker updates from one listing state to another. It is this movement of inventory from one state to another that is so empowering in getting that pulse on the market.
Here is an update to two of the dozens of new charts that will be launched very soon. Please keep in mind the absolute numbers will change upon launch of site and full system regen is performed, but trend will be the same.
MONTHLY PACE OF 'CONTRACTS SIGNED'
MONTHLY PACE OF NEW LISTINGS 'ACTIVE' TO MARKET
A steep tick down for both. A measure of Active to Pending Sales would tell us that the decline in inventory is muting the decline in signed deals - so I need to wait another 4-6 weeks after Labor Day to see if we get more action. If this pace continues another month or two, I'll start to worry about sellers out there that need to hit lower bids to move property. For now, due to seasonality, it's too soon to make the call.